Retailers adopt Subscription Services to offer Value and Experience

Technological advances witnessed in the past decade have transformed business operations in all industries, including the retail sector. Retailers have adopted subscription services enabled by the cloud and cloud billing platforms such as Tridens Monetization to enhance the consistency and reliability of their shipping schedules of products to customers. In turn, subscription services have enabled retailers to focus their efforts on maintaining an interactive win-win relationship with their subscribers. Studies indicate that subscription services have bestowed several benefits to retailers, including higher revenues, increased customer loyalty, and improved revenue predictability. Among the products offered through retail subscriptions include clothing, coffee, beauty products, vitamins, books, and essentials such as new razor heads and brush heads. Unfortunately, several issues should be streamlined to encourage consumers to subscribe to these services.

Retailers’ subscription boxes

According to Business Insider, even though retailers have invested immensely in subscription services, but uptake by consumers has been slower than in other industries as the largest target consisting of millennials become more interested in streaming services such as Netflix and gaming subscription services such as Arcade. Most US internet users across the generational divide have increased their spending on subscription services immensely in the last five years, but a majority have never even signed up for a single retail subscription service. A glance at the statistics can be worrying, but it is important to note that consumers are wary when it comes to products that affect their physical wellbeing, such as retail products. Unlike the gaming and streaming services, vast investment in retail subscription services within a very short period has led to saturation of the market even before take-off. The overwhelming number of subscriptions available to customers, which are all new and untested, creates confusion. Customers do not know which subscriptions are useful and which ones are only a waste of money. Several companies have a smarted subscription economy and are using a retail subscription to offer end-to-end experience, value, convenience, innovation, and discovery to their customers.

How subscription services allow retailers to experiment and innovate;

1. Discovery

Retailers are also using subscription services to take their customers on a journey for discovery. Subscription boxes are designed to deliver a surprising discovery keeping them hooked on the services.

Target: In 2018, Target introduced a $40 quarterly box subscription, which included its Cat & Jack private-label baby apparel. As the name suggests, each box offers six to seven apparel items and a rotating gift before they hit the stores as a bonus for only $40. The element of surprise in this subscription offering highlights that Target understands that consumers seek not only convenience but also discovery in subscriptions. Target’s $40 box also offers convenience and value because customers can return any items they do not want to keep.

Bokksu: Japanese snack subscription, known as Bokksu, is gaining subscribers at an alarming rate only because they offer end-to-end experience by enabling consumers to discover Japan’s rich culinary culture. Also, Bokksu offers its subscribers value by introducing new flavors regularly in snacks that have long shelf-life and easy to consume.

Atlas Coffee Club: Allow customers to subscribe to one or two bags of origin coffee every month that has been farmed using sustainable and eco-friendly practices. Customers can choose roasted or ground coffee delivered with a postcard from a new country.

Atlas Coffee subscription offering

2. Focusing on the future of Subscription Economy

Previously, retailers had to gamble on which market segment will grow more and drive sales in the future. Retail subscription services have eliminated the gamble by highlighting millennial demographics as the future of subscription economy allowing retailers to focus their efforts. For instance, Amazon introduced Prime Wardrobe fashion box in 2017 in a beta form, allowing customers to order three items or more without paying charges upfront. After a week, customers decide the items they want to keep and pay for them. This try-before-you-buy strategy effectively offers convenience and value to the millennial demographic who are the target market, the drivers, and the future of the subscription-based economy. Also, Amazon’s Wardrobe model is designed to entice millennials because it is neither a monthly nor a recurring subscription. The success of this subscription offering an increase in Amazon’s market share of U.S. apparel by 1.5% in 2017, prompting the company to extend the Wardrobe fashion box to all Prime Members in 2018.

3. Target and Capture Marginalized Segments

According to Retail Dive, subscription services have expanded and diversified in the past few years to cater to even the most unique needs of consumers. Currently, there are subscription services, such as Cryptid Crate for paranormal enthusiasts, Stage Gurl offers a box for exotic dancers, and so on. These two subscriptions offer a perfect example of how subscription services allow small to medium entities to target a neglected niche in the market and prosper. Even though humans have a wide range of interests and hobbies, norms within society have marginalized several groups. Any business that exploits the benefits offered by subscription services to enable marginalized groups to pursue happiness will undeniably entice that niche and capture a small but loyal segment in the market. For example, in the case of Stage Gurl, the needs of ‘exotic dancers’ were previously marginalized by big companies allowing this small entity to step in and capture their share of the market regardless of the size. Other retail subscriptions targeting marginalized consumers include;

Stitch Fix: Regarded as the trailblazer of the subscription model, Stitch Fix expanded its regular subscription offerings in 2018 to include men’s business box, Stitch Fix Kids box, and Stitch Fix Extras for women. Extension of the company’s subscription offerings allows subscribers to add on small but essential items such as socks, bras, and underwear to their regular shipment. The convenience offered by the extended offering enables the customer base of Stitch Fix to grow by 30%.

Ritual: The subscription offered by Ritual allows women to order a 30-day supply of multivitamins or prenatal vitamins that are vegan-certified, gluten-free, sugar-free, and contain only the essential nutrients required by the body.

Boxed: In April 2018, Boxed introduced Boxed Up subscription service for $49 per year and membership perks to reward their premium and big-spending subscribers. The company understands that consumers want VIP experience in subscriptions evidenced by the fact that Boxed Up prioritizes free shipping of orders of premium members over $20 along with 2% rewards, gifts, and exclusive deals. Offering VIP customer service is the key to success in a subscription economy.

Dailylook: Offers personalized subscription for a stylist, and a curated selection of clothing and accessories that are customized to the body shape, style, and other preferences of the customer. This subscription has enabled the company to sell 96% of all inventory at full price.

The Vitamin Shoppe: provides a custom assortment of supplements and vitamins based on customers’ online assessment.

Book of the Month: Subscribers get one new hardcover book each month chosen from a selection of judge-nominated books.

Bookabuy: This monthly and fixed-term subscription service offers customers a personalized reading journey from books that are tailored based on readers’ unique preferences.

5. Innovative Offerings

Retail subscription offers companies an invaluable opportunity to innovate their services to offer value and convenience to customers.

Gap: In October 2017, Gap launched the BabyGap Outfit subscription box and expanded it a month later to include Old Navy subscription box geared toward kids. In April 2018, it expanded the BabyGap Outfit subscription box further to include Bedtime Box offering sleepwear for kids for $49. Constant innovation of its subscription offerings enabled the company to attain one of the highest subscriber retention rates in the apparel industry. Focusing primarily on children’s apparel is a highly effective strategy because kids grow up faster and require new clothes regularly.

Vinyl Me, Please: Subscription offers customers one deluxe-edition record exclusively from an artist of classics, rap, and hip hop, or essentials genres.

Issues in Retail Subscription

Another issue contributing to slower uptake of retail subscriptions is the lack of understanding among retailers on what exactly customers want from their subscriptions. According to a McKinsey report, analysis of the most popular retail subscription services highlight all share specific features such as convenience, insightfulness, and the level of interaction offered regardless of the products rendered. This highlights that customers seek end-to-end experience in their subscriptions, which is the main selling point retailers need to focus on. Unfortunately, some retailers are obsessed with pushing products onto customers using recurring subscription services, which not only discourages new subscriptions but also dampens demand. The only reason why a customer would subscribe to a recurring subscription is if it offers value with an amazing end-to-end experience. Otherwise, it won’t differ from online shopping with free delivery service. Companies that understand what consumers want from their subscriptions have emerged as the pace-setters in a subscription economy.

About Tridens Monetization

Tridens Monetization offers retailers the capacity they need to adopt the subscription business model effectively and promptly. Tridens Monetization offers retailers the flexibility and agility to adapt to prevailing situations in the industry, such as changes in business models and revenue streams. Retailers that seek to bill subscribed customers based on monthly, quarterly, yearly, or recurring subscriptions should use Tridens Monetization.

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